KUALA LUMPUR (Aug 1): Following four consecutive years of significant growth, this year is set to see a sizeable decline in global battery investments for the first time since 2020, according to Rystad Energy research.

In a statement on Wednesday (July 31), the Oslo-based firm said a slump in battery infrastructure investments in mainland China is largely responsible for the global slowdown, as the Asian economic powerhouse navigates phases of growth driven by policy change, increased electric vehicle (EV) adoption, supply shortages, rising raw material costs and rapid capacity expansion.

It said China as a global leader in battery dynamics has maintained its position in lithium-ion battery (LIB) development, largely attributed to its early adoption of industrial-scale projects and rapid production growth to match its ambitious EV expansion plans.

Rystad Energy said that as a result, production surged more than 40% in both 2021 and 2022.

It said despite the pace of annual growth slowing from 2022 onwards, we understand this to be a consequence of maturity and sustained capacity expansion.

Rystad Energy said with the nation achieving self-sufficiency in battery supply, China’s attention has turned strategically towards Europe and the US, where major manufacturers are progressing from planning to production, albeit still at a nascent stage of development.

Meanwhile, Rystad Energy said that in Europe, the interdependency of EVs on LIB production underscores the concern raised by investment declines this year.

The firm said this downturn is primarily driven by diminishing EV market demand, which in turn poses risks of project delays and cancellations in EV infrastructure.

It said these challenges highlight broader issues in the EV sector, evident in the financial reports and stock prices of original equipment manufacturers (OEM) globally, including Chinese manufacturers that are facing profitability issues.

Furthermore, Rystad Energy said subsidies incentivise sector growth, yet high energy costs, labour expenses and bureaucratic hurdles impede progress for the industry at large.

The firm said that in contrast, the US has seen exponential growth in lithium demand, amid increasing concerns over secure supply chains.

It said despite efforts to ramp up LIB production, both Europe and the US struggle with nascent industrial infrastructure.

To mitigate reliance on Chinese supply chains for critical minerals, both Europe and the US are implementing policies to bolster energy security, it said.

Looking ahead, Rystad Energy said China’s stronghold in global battery investment and lithium trade appears secure due to its primary access to essential resources.

Rystad Energy battery market research vice president Duo Fu said China’s dominance in battery investment and lithium trade seems unshakeable for the foreseeable future, given their control over key resources.

“However, building a battery factory from scratch takes years and navigating local regulations adds even more time.

“This means the market two years from now remains unpredictable. Collaboration across the entire supply chain is crucial for the industry’s health,” said Fu.